SAT holds approved resolution plan under IBC immunizes corporate debtor from SEBI penalties, though directors' violations may still attract sanctions.
Approved Resolution Plan Bars SEBI Penalty: SAT
The Securities Appellate Tribunal (SAT), Mumbai, quashed SEBI penalties imposed on a corporate debtor, Delhi Capital Holdings Limited (DCHL), following approval of its resolution plan under the Insolvency and Bankruptcy Code (IBC). The ruling reinforces that a finalized resolution plan supersedes pre-formation regulatory penalties against the corporate entity.
While SEBI’s proceedings related to disclosure violations and market misconduct were initiated pre-IBC, SAT held that post-approval penalties against the corporate entity undermine the financial and operational fresh start envisaged under the IBC. However, the tribunal affirmed that individual directors could still be held liable for misconduct, and reduced penalties were upheld against them.
This decision sets a precedent for SEBI’s enforcement posture in post-IBC scenarios. Legal teams representing distressed companies should emphasize the res judicata effect of approved resolution plans when contesting legacy regulatory penalties. However, personal accountability of management remains intact, necessitating careful due diligence during insolvency proceedings.
